Posts Tagged ‘Private Treaty’

The Times of India group’s decision to make strategic investments in mid-level companies, in return for guaranteed advertising and editorial exposure in the group’s publications and media vehicles, through the quaintly named “Private Treaties“, has had several other media houses following suit.

Hindustan Times is said to be well on its way to establishing a similar division. Television majors like NDTV and CNBC are following suit. And as if to show that language publications are not lagging behind, influential Hindi groups like Dainik Bhaskar and Dainik Jagran are also off the blocks.

SALIL TRIPATHI, the London-based journalist, formerly with India Today and The Indian Post, and whose work has appeared in Wall Street Journal, Far Eastern Economic Review, and International Herald Tribune, among other publications, writes of the damage these wheels-within-wheels deals cause.

Most serious and professional newspapers recognize the need to separate editorial and advertising. The Wall Street Journal goes further, separating fact and opinion. So do other major US newspapers, but WSJ‘s distinctness stems from separate management structures for both.

At the convention of the South Asian Journalists’ Association (SAJA), New York Times editor Bill Keller said that the management structure of the edit page and news pages at the NYT, too, were separate. Which is how it should be, but all newspapers don’t have the luxury of such a roster of writers and management structures.

When editorial and advertising blend, the first casualty is credibility. A reader simply cannot know if a particular company, product, or an idea being promoted is because there’s a mass base of support for it, or because some experts like it, or is it because of financial considerations.

The Times of India‘s new business concept, Private Treaties, is audacious, innovative, and breathtaking. And incredibly underwhelming. It trades advertising for equity in companies.

As described in its poorly-designed, shoddily-edited, and jargon-filled website, it creates intangible value for companies in which the TOI group has a stake, by highlighting its intangible qualities, through the medium of TOI‘s publications.

If all that it means is a promotion restricted to discounted rates for advertising in the TOI, that would be simple enough, and acceptable to most purists in journalism. But with the Times you are never sure. In the past, it has encouraged its reporters to go on junkets to tourist resorts, and not always revealed the nature of the hospitality received.

When the Times group has launched its own businesses such as music, entertainment and so on, using prominent Indian performers, the newspaper’s page 1 has to give way to stories about that event, as though it is the most talked about event in town, if not the only event in town.

I recall in the mid-1990s, there were days of reporting on a modern ballet called Yes!, being staged under the choreography of my classmate from college in Bombay, the gifted dancer Shiamak Davar. The editor-in-chief would call senior Times editors to get hold of writers who’d say nice things about Yes!

A tax raid on TOI‘s owners in the 1980s got barely a mention in the newspaper.

When things got tough, the Jain family’s tax battles with the Indian government were cast as a human rights issue. A writer on the TOI edit page went on a junket with a European pharmaceutical company, and wrote an edit page piece extolling the medicine. Nothing wrong with a story about health on the TOI‘s edit page, but something was rotten in the state of Bori Bunder, if such a story appeared out of the blue, and no rival brand got similar coverage, or even comparison in that piece.

Then, the Times went the whole hog, with features like Impact and Spotlight, when news articles appeared on news pages, which were essentially advertisements.

It is against this background that the Private Treaties are highly suspect.

However much the Times might claim that it keeps editorial and advertising separate – when we know that’s not really the case—there will be an impact. A reporter chasing a story against a company in which the Times group has an equity stake will feel obliged to go softly. A reporter chasing a scandal involving a film star whose music is marketed by the Times group, will view the release of the CD differently.

It is so obvious, that it does not even need stating.

A property scandal, or a scam, involving a company that advertises in the newspaper may be problematic for some editors; how much more complicated it can get when the Times group has an equity stake in that company? And wouldn’t the negative story drive down the value of the investment?

There are sound reasons why across the world, editors try to keep editorial and advertising separate, to enhance the credibility of the editorial matter. When I worked with a US-owned magazine (Far Eastern Economic Review) and wrote an extensive piece on conflict of interest within some leading US investment banks, even though those banks were prominent advertisers in my magazine, at no stage did any editor tell me to go easy on that story.

At the Dow Jones group, reporters cannot own stocks in companies they write about. Other major US papers have similar codes.

In my reporting days in Bombay in the 1980s, I’ve seen, with great dismay, financial reporters of several leading Indian dailies rushing out of a press conference where a company has declared its results, to make phone calls to their brokers to buy or sell shares (there were no cell phones then).

Mint, the new business daily launched by the Hindustan Times group, has transparently placed its code of conduct on the web. It also recently declared to its readers how it would publish advertorials, and how they would be distinct from edit pages, and how edit staff would not be involved in preparing them. (The International Herald Tribune and other American publications do likewise).

Unless the Times institutes similar safeguards, it would seem that Private Treaties marks another step in the journey the Times—“the leader [that] guards the reader”—has taken, transforming the nature of journalism.

In the late 1980s, the Times group had begun distributing promotional products in a plastic bag, together with the magazine, Illustrated Weekly of India, which the Times used to publish. We used to throw those products away, preferring to read the magazine. Now the magazine is gone; the toothpaste remains.

Hopefully, the Times, in its drive to enhance the value of companies it invests in through this innovative mechanism, will also attach some value to its readers.

Disclosure: I write frequently for Mint, and the Wall Street Journal‘s international editions; often for the International Herald Tribune, and on rare occasions for the Times of India. But this is not a case of sour grapes.

The selling of the news columns in Indian newspapers, a pernicious practice that deliberately blurs the distinction between independently generated news and paid advertisements, has assumed pandemic proportions with language publications unabashedly apeing the market-leader The Times of India, which pioneered the move.

But, it now turns out that even paid advertisements are no longer what they seem in the Times group. Very often, they are tied to the group’s investments in select companies. The news and advertising exposure these companies get in its publications, boosts their stock prices, that swells the bottomline of the investing company.

It’s a win-win but guess who loses?

SUCHETA DALAL, India’s numero uno business investigative journalist who cracked open the Harshad Mehta case, and who now runs the personal finance magazine MoneyLIFE, throws light on a new strategy of the group that “tears down every shred of the wall between editorial, advertising and public relations”, and takes readers and investors for a royal ride.

If you are an investor who depends on India’s largest-selling economic newspaper for unbiased news, then you must know and understand the concept of “private treaties” (PT). Since The Times of India (TOI) far outsells every other English newspaper and The Economic Times is by far the market leader in the economic news category, the concept is of universal interest.

Although PTs sound like agreements between two sovereign nations, they are, in fact, pacts between the Times of India group and approximately 100-odd companies, under which TOI buys shares of small and fast-growing companies. The list is expanding rapidly.

In an article for India-Seminar on “The changing Indian media scene“, T.N. Ninan, editor of Business Standard, described PTs as “basically the transfer of shares in return for advertising.” He said, Bennett Coleman & Co, which owns the Times of India group of publications, “invests in usually mid-rung companies that are keen to jump into the big league but are perhaps without the big bucks to spend on marketing. The share purchase money is immediately taken back against the promise of guaranteed advertising in Bennett publications—to build the investee company’s brand(s). Part of the deal is even said to be editorial coverage, though this remains unconfirmed.”

Ninan goes on to say, “If true, by definition, this will have to be positive coverage” because “the brands have to be built up, so that the shares bought by Bennett gain in value and can be sold.”

MoneyLIFE has in its possession a document to prove that journalists are being designated as “champions” for PT clients to tailor editorial coverage to enhance the value of these companies and TOI‘s investment.

An e-mail by The Economic Times editor Rahul Joshi (dated 29 November 2007) says:

“At ET, we are carving out a separate team to look into the needs of Private Treaty clients. Every large centre will have a senior editorial person to interface with Treaty clients. In turn, the senior edit person will be responsible, along with the existing team, for edit delivery. This team will have regional champions along with one or two reporters for help—but more importantly, they will liaise with REs (Resident Editors) and help in integrating the content into the different sections of the paper. In this way, we will be able to incorporate PT into the editorial mainstream, rather than it looking like a series of press releases appearing in vanilla form in the paper.”

Joshi then goes on to name the PT “champions” for each region, who will “advise” the regional editorial chief to carry ‘stories’ about PT clients. He also designates “trouble shooters” in each region, probably to ensure that no PT client is offended with negative coverage.

While this kind of support for advertisers in the editorial pages is extraordinary anywhere in the world, it is important to remember that there is nothing clandestine about what TOI is doing. The PT arrangement, along with all the “benefits” that would accrue to those who sign up, along with testimonials from successful PT customers such as Nirmal Jain of India Infoline and others is on two group websites. These are www.privatetreaties.com and timesprivatetreaties.com.

In the past two years, TOI has invested over $500 million (approximately Rs 2,000 crore) in 114-odd companies in diverse businesses. It is a private equity firm.

TOI claims that when these companies are mentioned editorially, its investment in them is mentioned. Indeed, one occasionally notes such a mention, but how many investors understand what PT stands for or the relationship that is implied? Moreover, while such a disclaimer may work when a press release is published, will it be followed when journalist “champions” work hard to “integrate the content” to ensure that it does not look like “vanilla” press releases?

Typically, the Times group buys a 5%-10% stake in mid-sized companies that are planning to go public or looking for private equity. The investment can vary from Rs 10 crore to Rs 100 crore. The company agrees to invest an equal amount in advertising in Times publications over a three-to-five-year period at a steep discount to the normal advertising rates.

Most companies that sign PTs are those planning public issues, selling expensive realty projects or looking for private equity. All of them are looking for publicity and an assurance of positive editorial coverage. For the Times, it is usually a double bonanza: significant capital appreciation and tax-free income (since there is no long-term capital gains tax)—on the other hand, advertising revenue is fully taxed.

Investors must know the exact list of Times PT clients (which is available on their website for easy reference) because you are least likely to hear any bad news about these companies. They include:

It offers “advertising support, branding support and corporate image development.”

PT’s vision is stated as follows:

# We dare to go where no one has dreamt of venturing before.
# We seek advertising clients that no one wants.
# We look for value that no one sees.
# We co-create wealth that no one imagines.

All this is fine from the business perspective of the Times. Where does the group’s “win-win relationship” with PT customers leave the readers/investors? They clearly do not figure in the equation at all. The group indeed tests the limits in what passes off as news, but in the cut-throat fight for the advertising buck, what exactly is an “advertising client that no one wants”? Surely, not India Infoline?

The PT website lists every press release issued on behalf of PT clients. The headlines alone reveal the slant. For instance:

# ‘Skyscrapers all set to change Noida skyline’ (TOI)
# ‘Milk & Honey Towns’ (ET)
# ‘Companies rake in big moolah serving NRIs’
# ‘Sai Info to come up with 18 e-malls by March’
# ‘Airline mergers is bad news for consumers’ (for Paramount Airlines)
# ‘What you get is exactly what you have paid for’ (for Gitanjali)
# ‘Parajia has ability to swing big deals’ (for India Infoline)
# ‘Gitanjali Lifestyle to ride high on luxury’
# ‘Reason to Smile’ (for GTL, earlier Global Telesystems)
# ‘Pantaloons rolls out the red carpet to woo the last minute Durga Puja shopper in Kolkata’
# ‘Bajaj bros resume legal battle over empire’ (this one for Bajaj Hindusthan is particularly interesting) and finally check this one for Osian—‘India’s brush with soccer is all set for a change. History is being re-written on a new canvas and the view looks optimistic’.

This unique “win-win” situation indeed works wonderfully well in a monster bull run. While companies and the publishing group are the real winners, the investors are losing nothing at the moment. But remember this is a two-year-old concept and the implications of tearing down every shred of the wall between editorial, advertising and PR will be evident only when things look less sunny for the markets and the economy.